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Current Trade Policy Issues
Brenda A. Jacobs
OFII General Counsel Conference
October 16, 2009
Overview
• Start with the here and now and
then move to the future
– Lacey Act declaration
requirements, extra-territorial
risks
– U.S. preference programs
reauthorization
– U.S. Customs reauthorization
– Potential climate
change/border measures
– AD/CVD trends
Lacey Act: New Liability Risks
• In May 2008, the U.S. Congress amended a law that
was originally created to protect wildlife, such as exotic
species of animals and birds, expanding it to cover
PLANT PRODUCTS.
• The revised law was sought by environmental
organizations, concerned about deforestation, and by
domestic paper and hardwood industry groups,
concerned that imported products had an unfair
advantage because of illegal trade.
Lacey Act: New Liability Risks
• Environmental groups assert that 10 percent of wood
products imported into the U.S. annually, worth $3.8
billion, are derived from illegally logged timber.
– Theft of timber, including from parks or other protected areas
– Harvesting without permission or otherwise failing to comply with
harvesting regulations
– Failure to pay royalties, taxes or other required fees
• It’s about holding the “global supply chain” accountable
for the legality of the wood they use.
– It’s about setting a global precedent.
The U.S. Lacey Act, Amended
• The new law makes it illegal to import, export, transport, sell,
receive, acquire, or purchase in interstate or foreign
commerce any plant taken or trade in violation of the laws of
a U.S. state or a foreign law.
– Big. problem: how do you know what foreign laws apply and might have been
violated?
• The new law also makes it illegal to make or submit any false
record, account or label for, or any false identification of, any
plant.
The Import Declaration – PPQ 505
• The Lacey Act amendments require, as a condition of entry
for imported products, that U.S. importers of plant products
file a declaration identifying for each plant product:
– the scientific name of the plant (genus and species),
• http://plants.usda.gov/classification.html
– the value of the importation
– the quantity of the plant
– the name of the country in which the plant was harvested (which may
be different from the country of origin of the finished product).
• The declaration is intended to help U.S. Government
(primarily DOJ) officials detect possible illegal logging.
– A strict liability standard. U.S. importer can be held liable and goods
seized even if did not know there was a violation; knowledge may only
affect the penalty that is applied.
Lacey Act Penalties
• If an importer “knowingly” engages in prohibited conduct:
– Trades in illegally sourced wood: Criminal felony fine up to
$500,000 for a corporation, $250,000 for an individual; possible
prison time, up to 5 years; forfeiture of goods
– False import declaration: criminal felony as above, or civil
penalty up to $10,000; possible prison time, up to 5 years;
forfeiture of goods
– Civil penalties if a party “in the exercise of due care should
know” of the illegal history of the plant in question or that
“knowingly violates” the declaration requirement, up to $10,000
• Any party that unknowingly violates the declaration
requirement may be assessed a civil penalty of not more than
$250.
The Import Declaration – PPQ 505
• Declaration requirement being phased in. Schedule/product
coverage revised several times, to reduce scope
– Significant postponements: particle board, paper and furniture
• Currently:
– Since April 1: Chapter 44 articles of wood (4401 (fuel wood), 4403,
4404, 4406, 4407, 4408, 4409, 4417 (tool handles), 4418)
– Since October 1: More Chapter 44: 4401 (wood charcoal), 4412
(plywood), 4414 (frames), 4419 (tableware), 4420
– Starting April 1, 2010: 4421, 6602 (umbrellas), 8201 (hand tools), 9201
(pianos), 9202 (other stringed instruments), 9302 (revolvers, pistols),
93051020, 940169 (seats with wood frames), 950420 (billiard articles)
9703 (sculptures)
The U.S. Lacey Act, Amended
• A pending comment period on the revised phase in schedule
expires November 2.
• Even if no declaration requirement, liability for violation of
foreign laws can still attach
• The declaration requirement is based upon the classification
of the finished product
– Wood trim won’t trigger declaration requirement if the
classification is not covered
– Enclosed labels, manuals not covered
• A Congressionally-mandated review of product coverage is
scheduled to begin by next summer.
U.S. Preference Programs
• Here we go again: 10 weeks away from another
expiration of unilateral preference programs
– Generalized System of Preferences expires 12/31/09
– Andean Trade Promotion & Drug Eradication Act expires
12/31/09
• Last minute extensions possible, but:
– Uncertainty already undermining business planning
– The causes and disagreements on courses of action more
contentious this year, dividing both the business community and
Members of Congress
U.S. Preference Programs
• ATPDEA currently only applies to products of Peru,
Colombia and Ecuador
– Bolivia suspended last December.
– Chevron lawsuit behind opposition of some companies and
associations to extension of benefits for Ecuador this year.
– Peru needs both ATPDEA and the FTA so long as Colombia
not a party to an FTA that cumulates with Peru.
U.S. Preference Programs
• Revised GSP product scope, as well as unified origin rules
and eligibility criteria, had been the focus of a significant
reform effort.
•
But quickly evolved into controversy over possible inclusion of apparel,
opposition of AGOA beneficiaries (over dilution of preferences)
• Baucus and Rangel support a long term extension of
ATPDEA and GSP, to provide certainty now, and time later to
work on reform.
• Grassley says no renewal; first fix the programs, including
revised graduation criteria
• Brady says reform too risky, just extend.
U.S. Customs Reauthorization
• S. 1631 introduced by Baucus, co-sponsored by Grassley
– Intended to re-prioritize trade facilitation and enforcement, in
response to security as a top priority
– On a relatively slow track, with no House counterpart yet
• Provisions raising the most significant issues:
– Creates a principal deputy CBP commissioner, subject to
Senate confirmation, to oversee commercial operations
– Requires DHS to identify trade benefits for C-TPAT participants
– Security filing (ISF) data could be used for commercial
enforcement purposes
• “best information available” versus “reasonable care standard”
Climate Change Legislation
• House bill (Waxman-Markey) approved in June
• Senate bill (Kerry-Boxer) introduced, but still a draft
• Border measures included in W-M come with trap doors,
providing a basis for an Administration to avoid imposing
them
• Placeholder in K-B expresses expectation of border
measures “consistent with our international trade obligations”
and a link to allowances to “energy intensive and trade
exposed industries.”
Climate Change Legislation
• Competing objectives for U.S. legislation:
– Create leverage, i.e., to strengthen the hand of U.S. negotiators
seeking to reach a global solution to the global climate change
problem
– Prevent carbon leakage – the movement of U.S. production
abroad as a result of the difference in compliance costs –
through allowances for energy intensive industries
• Ultimately, the issue is the futility of imposing mandatory
greenhouse gas (GHG) emission restrictions on the U.S.
economy without ensuring that China and India and other
fast-growing developing economies do the same
Trends In AD/CVD Cases
• Between 10/1/08 and 9/30/09, 26 new antidumping and/or
countervailing duty cases were initiated at the USITC.
• 22 of those cases involved China.
• Non-market economy status and the availability of CVD as an
additional remedy is making China an attractive target.
• GPX case decided by the US Court of International Trade on
September 18 highlights the incentives for petitioners and the
frustrations for respondents.
– Just the beginning of a long litigation battle.
Trends In AD/CVD Cases
• Under China’s accession agreement, US has no obligation to
consider China a market economy before December 2016.
– Vietnam: not until December 2018.
• Political factors limit the Commerce Department’s
willingness/ability to complete process for recognizing market
oriented industries (MOI) or market oriented enterprises
(MOE).
– Might GPX eventually renew interest in those proposals?
Final Thoughts
• U.S. regulatory burdens on the upswing:
– Lacey Act’s extra-territorial reach,
– Increased product safety responsibilities and scrutiny,
– Preference programs face a gap in coverage,
• Also, products entering under both preference programs and free trade
agreements are subject to increased scrutiny by CBP, which is concerned
about loss of revenues from false claims,
– CBP under pressure to meet both security and trade
facilitation/enforcement goals,
– Border measures may be remote, but threat along with concerns about
allocations of offsets, act as an irritant,
– Number of Title VII petitions headed further upward
• Ultimately, it may come back in this direction.
.
Current Trade Policy Issues
• Brenda A. Jacobs
Sidley Austin LLP
1501 K Street, NW
Washington, D.C. 20005
202-736-8149 direct
202-736-8711 fax
email:
[email protected]